What is Freddie Mac?

“Freddie Mac” is an acronym for the Federal Home Loan Mortgage Corporation, which is a public government-sponsored enterprise (GSE). A common misconception of the organization is that it makes loans to homebuyers.

What it actually does is purchases loans from mortgage lenders (the secondary market), replenishing their funds so they can continue to lend mortgages to more borrowers. That’s why Freddie Mac was created in 1970: to expand the secondary market for mortgages in the U.S.

This GSE also takes those purchased loans and sells them as mortgage-backed securities to investors on the open market. This further increases the supply of money available for mortgage lending and increases the money available for new home purchases.